Some new calculations suggest that the answer could be more than you think.

The Mortality Cost to Smokers
W. Kip Viscusi, Joni Hersch
This article estimates the mortality cost of smoking based on the first labor market estimates of the value of statistical life by smoking status. Using these values in conjunction with the increase in the mortality risk over the life cycle due to smoking, the value of statistical life by age and gender, and information on the number of packs smoked over the life cycle, produces an estimate of the private mortality cost of smoking of $222 per pack for men and $94 per pack for women in 2006 dollars, based on a 3 percent discount rate. At discount rates of 15 percent or more, the cost decreases to under $25 per pack.

Update: Econblogger Harry Clarke, who’s thought much more about smoking than me, posts his views. He also wonders whether we can reconcile the new Viscusi with the old Viscusi.

3 Responses to How much is that pack of cigarettes going to cost you?

If smoking was as bad as our Gov’ts would have us believe, then our Gov’ts would be obliged to ban tobacco products across the country, as they have done with other illicit and harmful drugs. I believe our Gov’ts are far more addicted to tobacco taxes than smokers are to tobacco.

This is an exciting paper with profound implications. Among them implications for Viscusi’s own view of smoking. In ‘Smoke Filled Rooms’ Viscusi argues that the external costs of smoking are quite low and that people fully (in fact ‘over’) anticipate the risks of smoking. Hence a case for laissez faire.

The external costs of smoking are not negligible – ask a wife who dies of lung cancer whether she foregives her smoker husband on the grounds he paid lots of taxes – but these costs are low relative to the huge private costs of smoking.

Viscusi was also wrong in his views that youth make accurate predictions about smoking when they initiate the habit. Most overstate the positive benefits of smoking (using an ‘affect’ heuristic) and massively overestimate the possibilities of quitting.

Can Viscusi really claim that new male smokers accurately internalise a cost of smoking of $222 per pack? Once you throw away a rational choice paradigm it makes sense to target these enormous private costs.

These new estimates of the costs of smoking are 7-10 times earlier estimates of $20-$30 per pack. The reasons are instructive. In the Viscusi-Hersch paper evidence on mortality costs is used to show that smoking inflicts most of its costs at ages 60+ but that there is higher mortality among all those who smoke. This accounts for about half the difference in estimated costs.

Viscusi is a great economist and has contributed enormously to our understanding of how to account fror risks. But I think his earlier work on smoking has been discredited by the work of others and his own important new work with Hersch. I hope he will retract his policy views to accord with the new evidence.

“Can Viscusi really claim that new male smokers accurately internalise a cost of smoking of $222 per pack?”

The argument that smokers can’t internalize a cost of $220 dollars a pack seems to imply that the value of one’s final years is equal to their market cost. This ignores the cost-value distinction with respect to a person’s life. Besides which, giving each pack a monetary “life-cost” seems silly when most people don’t consciously attach value to life in dollar terms. An easier statistic to internalise would be something like “each cigarette shortens your life by one day” – and these kinds of stats are well known.

For the unmentioned subject above to target private costs implies another paradigm: the belief that this subject is *more* rational than that person. And rationality has to do with the value John Chimney attaches to a cigarette/a day of his life, and not their market value. The implication here is not just “you don’t know any better” but “you don’t know what you want, and I do”.